Mortgage Resolution Servicing, LLC et al v. JPMorgan Chase Bank, N.A. et al

Filing 205

MEMORANDUM AND ORDER granting in part and denying in part [1 in 17-mc-0166] Motion to Compel; granting in part and denying in part [1 in 17-mc-0166] Motion for miscellaneous relief, specifically to Transfer Motion to the Issuing Court by 1st Fidel ity Loan Servicing, LLC, Mortgage Resolution Services, LLC, S & A Capital Partners, Inc. The plaintiffs have filed a motion to compel compliance with their subpoena to depose a third-party witness, Erika Lance, who refused to answer certain questio ns on the basis that they called for the disclosure of trade secrets. The plaintiffs seeks sanctions, apparently under Rule 37(a)(5) of the Federal Rules of Civil Procedure, for Ms. Lance's "obstruct[ion]" of her original deposition. I will not impose sanctions here. (As further set forth in this Order.) For the foregoing reasons, the plaintiffs' Motion to Compel Compliance with Subpoena of Third-Party Witness Erika Lance and for Sanctions (Docket no. 1 in 17 MC 166) is granted in part and denied in part as discussed above. (Signed by Magistrate Judge James C. Francis on 7/6/2017) Copies Sent By Chambers. (cf) Modified on 7/6/2017 (cf).

denied in part.
Background
As I noted in a recent decision, discovery in this action is
currently limited to the plaintiffs’ tort and breach of contract
claims, which concern “(1) the alleged misrepresentations and
omissions by the defendants about loans sold to the plaintiffs and
(2) the defendants’ practice of retaining payments made on the
loans, forgiving loans, or releasing liens on loans sold to the
plaintiffs.”

Mortgage Resolution Servicing, LLC v. JPMorgan Chase

Bank, N.A., No. 15 Civ. 293, 2017 WL 2305398, at *1 (S.D.N.Y. May
18, 2017) (quoting Mortgage Resolution Servicing, LLC v. JPMorgan
Chase Bank, N.A. (“Mortgage Resolution II”), No. 15 Civ. 293, 2016
WL 3906712, at *2 (S.D.N.Y. July 14, 2016)).

Information relevant

to other claims, such as the plaintiffs’ (now dismissed) claim
under the Racketeer Influenced Corrupt Organizations Act (“RICO”),
is not subject to discovery. See id.; see also Mortgage Resolution
Servicing, LLC v. JP Morgan Chase Bank, N.A., No. 15 Civ. 293, 2017
WL 570929, at *4-5 (S.D.N.Y. Feb. 13, 2017) (dismissing civil RICO
claim).2

2

The plaintiffs have filed a motion for leave to file a
Fourth Amended Complaint and amended RICO statement. (Notice of
Plaintiffs’ Motion for Leave to Amend and Supplement Complaint and
RICO Case Statement Under F.R.C.P. 15 dated March 6, 2017, in 15
Civ. 293).
However, discovery is not available for “likely,
anticipated, or potential claims or defenses.” Lifeguard Licensing
2

Ms. Lance is an employee of Nationwide Title Clearing, Inc.
(“NTC”), a non-party that allegedly prepared and filed on behalf of
the defendants lien releases for mortgages actually owned by the
plaintiffs. (Pl. Memo. at 3-5).

These included releases prepared

in connection with the “DOJ Lien Release Process” (also known as
the “Pre-DOJ Lien Release Project”), a program the defendants
established to “excise from their books loans that would otherwise
require compliance with anti-blight programs.” (Pl. Memo. at 5-6);
Mortgage Resolution II, 2016 WL 3906712, at *1. Documents produced
pursuant to subpoena revealed that Ms. Lance prepared many of the
allegedly “fraudulent lien releases and subsequent Vacations of
Modifications of Mortgages” that injured the plaintiffs.

(Pl.

Memo. at 7).
In February 2017, the plaintiffs served Ms. Lance with a
subpoena in her individual capacity, rather than as a witness on
behalf of the company pursuant to Rule 30(b)(6) of the Federal
Rules of Civil Procedure.

(Pl. Memo. at 7).

eventually scheduled for March 21, 2017.
Lance

(on

questions

the
that

advice
would

of

Her deposition was

(Pl. Memo. at 8).

counsel)

refused

purportedly

elicit

to

answer

NTC’s

Ms.

certain

proprietary

information, such as questions about (1) NTC’s clients or types of

Corp. v. Kozak, No. 15 Civ. 8459, 2016 WL 3144049, at *3 (S.D.N.Y.
May 23, 2016) (internal quotation marks omitted).
3

clients, and (2) the types of systems Ms. Lance used to create
certain documents on which her name appears and the manner of
creating certain such documents. (Pl. Memo. at 9-12; Deposition of
Erika Lance dated March 21, 2017, in 15 Civ. 293 (“Lance Dep.”) at
10-11, 21).3
answer

When Ms. Lance asserted that she would refuse to

similar

deposition.

questions,

plaintiffs’

counsel

terminated

the

(Pl. Memo. at 12; Lance Dep. at 21-22).

Discussion
A.

Governing Law

Ms. Lance asserts that Florida law applies to this privilege
dispute, and the plaintiffs do not argue otherwise.

(Non-Parties’

Response to Plaintiffs’ Motion to Compel Compliance with Subpoena
of Third-Party Witness Erika Lance and for Sanctions (“Lance
Memo.”) at 11; Plaintiffs’ Reply to Non-Parties’ Response to
Plaintiffs’ Motion to Compel Compliance with Subpoena of Third-

3

The transcript of Ms. Lance’s deposition was designated
“Confidential” and “Attorneys’ Eyes Only” pursuant to the
confidentiality order entered in the main action, and has been
filed under seal in that action. (Protective Order dated Aug. 30,
2016, in 15 Civ. 293; Sealed Document filed April 14, 2017 in 15
Civ. 293 (ECF No. 164)); Mortgage Resolution Servicing, LLC v.
JPMorgan Chase Bank, N.A. (“Mortgage Resolution IV”), No. 15 Civ.
293, 2017 WL 2172322, at *1 (S.D.N.Y. May 16, 2017).
The
plaintiffs have challenged those designations. Mortgage Resolution
IV, 2017 WL 2172322, at *1. I note that the deposition transcript,
along with other documents, may have been filed under seal in the
Middle District of Florida; however, the Southern District of New
York holds no documents under seal in this ancillary proceeding.
4

Party Witness Erika Lance and for Sanctions (“Reply”) at 1, 5);
Stephens v. American Home Assurance Co., No. 91 Civ. 2898, 1995 WL
230333, at *7 (S.D.N.Y. April 17, 1995) (employing New York choiceof-law rules in diversity case and applying law of jurisdiction
where conduct subject to privilege occurred); but see Del Giudice
v. Harlan, No. 15 Civ. 7330, 2016 WL 6875894, at *2 (S.D.N.Y. Nov.
21, 2016) (“Pursuant to Federal Rule of Evidence 501, ‘in a civil
case, state law governs privilege regarding a claim or defense for
which state law supplies the rule of decision.’”).4

I will not

disturb the parties’ (implicit) agreement here.
Florida’s Uniform Trade Secrets Act defines a trade secret as
information, including a formula, pattern, compilation,
program, device, method, technique, or process that:
(a) Derives independent economic value, actual or
potential, from not being generally known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure
or use; and

4

It appears that piercing the privilege for trade secrets is
particularly difficult under New York law, placing only a “minimal
initial burden of demonstrating the existence of a trade secret” on
the person resisting discovery and requiring the “party seeking
disclosure of trade secrets [to] show that such information is
‘indispensable to the ascertainment of truth and cannot be acquired
in any other way.’” Ferolito v. Arizona Beverages USA, LLC, 119
A.D.3d 642, 643-44, 990 N.Y.S.2d 218, 220 (2d Dep’t 2014) (quoting
Carecore National, LLC v. New York State Association of Medical
Imaging Providers, Inc., 24 A.D.3d 488, 489, 808 N.Y.S.2d 238, 239
(2d Dep’t 2005)).
However, Ms. Lance has argued for the
application of Florida law -- discussed below -- which seems less
protective of trade secrets than does New York law.
5

(b) Is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
Fla. Stat. § 688.002(4).

Florida’s Evidence Code contains a

privilege protecting trade secrets:
A person has a privilege to refuse to disclose, and to
prevent other persons from disclosing, a trade secret
owned by that person if the allowance of the privilege
will not conceal fraud or otherwise work injustice. When
the court directs disclosure, it shall take the
protective measures that the interests of the holder of
the privilege, the interests of the parties, and the
furtherance of justice require. The privilege may be
claimed by the person or the person’s agent or employee.
Fla. Stat. § 90.506.

When this privilege is asserted, the person

or entity resisting discovery has the burden to show that “the
requested production constitutes a trade secret,” Landsport Corp.
v. Canaramp Corp., No. 3:05 CV 237, 2006 WL 4692567, at *2 (M.D.
Fla. April 11, 2006) -- that is, “that the information sought is a
trade

secret

disclosure

may

or
be

confidential
harmful,”

business
American

information
Express

and

Travel

that

Related

Services, Inc. v. Cruz, 761 So.2d 1206, 1209 (Fla. Dist. Ct. App.
2000).

If that burden is shouldered, the party seeking disclosure

must “show reasonable necessity for the requested [information].”
Landsport, 2006 WL 4692567, at *2. Ultimately, “[d]etermination of
whether the need [for the information] outweighs the harm of
disclosure falls within the sound discretion of the trial court.”
I.S.E.L., Inc. v. American Synthol, Inc., No. 3:08 CV 870, 2009 WL

6

3367237, at *2 (M.D. Fla. Oct. 15, 2009).
B.

Analysis
1.

Trade Secret Privilege

The briefing clarifies certain information that the plaintiffs
seek to elicit from Ms. Lance.

First, the plaintiffs insist they

do not seek the identities of NTC’s customers, but merely the
“‘types’ of clients NTC has.”

(Reply at 3).

Second, they assert

that they seek information only about publicly available documents
“located in recording jurisdictions nationwide” -- “forms” filled
out by Ms. Lance and “the content of [those] forms” -- and do not
inquire about specific areas that NTC’s Chief Legal Officer, Myron
Finley, has asserted are trade secrets (Affidavit of Myron Finley
dated May 11, 2017 (“Finley Aff.”), ¶¶ 2, 7-8; Reply at 4).
I am hampered here by the posture of this dispute.

At Ms.

Lance’s deposition, counsel for the plaintiffs introduced two lines
of

questioning

secrets.
deposition

that

prompted

Plaintiffs’
(which

lasted

concerns

counsel

about

consequently

approximately

twenty

revealing

trade

terminated

the

minutes).

The

plaintiffs now argue that the specific questions asked were not
intended to elicit confidential information, and that therefore Ms.
Lance should be compelled to answer them.

However, it is unlikely

that, if Ms. Lance were ordered to appear for another deposition in
Florida, the plaintiffs would be content with asking those two
7

questions.

And because the deposition was so swiftly terminated,

the record does not reveal what specific follow-up questions or
other lines of questioning would provoke objectionable instructions
not to answer.

I am therefore left to guess at what those areas of

inquiry might be.

Cf. American Express Travel, 761 So.2d at 1209

(noting that determining whether information sought is trade secret
“will usually require that the trial court conduct an in camera
inspection of the materials in question”).
I am hindered, too, by Ms. Lance’s submissions, particularly
Mr. Finley’s affidavit, which provide little guidance as to what
confidential

information

might

be

revealed

in

Ms.

Lance’s

deposition.

One of Mr. Finley’s statements obscures extremely

broad categories of information behind abstruse business jargon:
“[T]hese proprietary business processes generally relate to the
division

of

labor

between

processing documents.”

individuals

in

(Finley Aff., ¶ 7).

the

workflow

for

Another is clearer

about its breadth, asserting privilege over “how the company uses
computer systems to perform work.”

(Finley Aff., ¶ 7).

Still

another is oddly specific, designating as off-limits questions
about “the speed at which the company’s systems operate.”

(Finley

Aff., ¶ 7). In any case, taken together and taken literally, these
categories appear to encompass all but the most general information
about the work NTC performs for its clients.
8

However broad

Florida’s definition of trade secrets is, surely that exceeds it.
Indeed, Ms. Lance, in a deposition in a prior action, and Bryan
Bly, an NTC employee who was deposed in this action, have both
answered questions that revealed information included in one or
more of these categories. (Deposition of Erika Lance dated June 2,
2010, attached as Exh. 2 to Notice of Filing of Corrected Exhibits
dated April 21, 2017, at 8-12, 14-18, 22-23, 26-30; Deposition of
Bryan Bly dated March 21, 2017 (“Bly Dep.”), at 13-14, 18-19, 2223).5
As it stands now, it has not been established conclusively
that trade secrets or other confidential information will be
elicited by plaintiffs’ counsel. Nonetheless, I have no doubt that
NTC does possess trade secrets that might be compromised, depending
on the plaintiffs’ questioning of Ms. Lance, should I order her to
reappear for deposition.
(hypothesized)

trade

I will therefore evaluate whether the

secrets

are

reasonably

necessary

to

the

plaintiffs’ case.
Ms. Lance argues that the information sought is relevant only
to the plaintiffs’ dismissed RICO claims from the Third Amended

5

Like the transcript of Ms. Lance’s April 21, 2017
deposition, the transcript of Mr. Bly’s deposition has been
designated “Confidential” and “Attorneys’ Eyes Only” and is
currently the object of a motion challenging those designations.
Mortgage Resolution IV, 2017 WL 2172322, at *1. It, too, has been
filed under seal in the main action.
9

Complaint and the potential RICO claims from the proposed Fourth
Amended Complaint.

(Lance Memo. at 19-23).

She is incorrect.

Information about the types of clients NTC services is appropriate
background information about the company for which Ms. Lance works.
And the plaintiffs have represented that the documents they asked
about at the deposition are related to lien releases filed by NTC
on loans the plaintiffs purchased from the defendants. Allegations
about such releases are central to the contract and tort claims
still at issue here.
at *1-2.

See Mortgage Resolution II, 2016 WL 3906712,

Information elicited about these documents is therefore

relevant.

See, e.g., id. at *3 (“Relevance is . . . ‘construed

broadly to encompass any matter that bears on, or that reasonably
could lead to other matter that could bear on’ any party’s claim or
defense.” (quoting Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340,
351 (1978))).
Ms. Lance insists that a showing of mere relevance is not
sufficient.

(Lance Memo. at 18).

Cases do indicate that the

entity seeking trade secrets must show that the “information is
relevant and necessary to the action.” I.S.E.L., 2009 WL 3367237,
at *2.

However, the required showing of “necessity” does not

appear to be onerous.
polestar.”

Rather, “[r]elevance [] is always the

McDonald’s Restaurants of Florida, Inc. v. Doe, 87 So.

3d 791, 793 (Fla. Dist. Ct. App. 2012).
10

Thus, courts have ordered

trade secrets disclosed without making any explicit finding greater
than relevance, see, e.g., Cruise Compete, LLC v. Smolinski &
Associates, Inc., No. 12 MC 80796, 2013 WL 12131320, at *3 (S.D.
Fla. Jan. 8, 2013) (“The Court concludes that [the plaintiff] has
shown a reasonable necessity for the customer lists, as the
information is directly relevant to the claims at issue . . . .”),
or upon a showing that the information is both relevant and
unlikely to be available from another source, see, e.g., EchoStar
Satellite v. Viewtech, Inc., No. 10 MC 60069, 2010 WL 2822109, at
*4-5 (S.D. Fla. July 16, 2010).

Conversely, trade secrets have

been protected from disclosure where they were sought as part of “a
fishing expedition” in which the requesting party seeks “show
pieces for trial.” McDonald’s Restaurants of Florida, 87 So. 3d at
794; see also Landsport, 2006 WL 4692567, at *2 (declining to order
disclosure of trade secrets where defendants merely asserted it
sought to learn about role of non-party in alleged tortious
interference

in

defendants’

business

relations);

Cytodyne

Technologies, Inc. v. Biogenic Technologies, Inc., 216 F.R.D. 533,
536-37 (M.D. Fla. 2003) (protecting third-party’s confidential
information from disclosure where proponent’s counsel “was unable
to support a need to any of the requested information, other than
to perhaps verify discovery received from Plaintiff”).
Here, as the plaintiffs argued during Mr. Bly’s deposition,
11

“It was the lien releases and various documents that were signed by
Chase employees as well as NTC employees that caused harm to the
plaintiffs.”

(Bly

Dep.

at

14).

Thus,

questions

about

the

preparation of those documents “directly relate[] to the contract
and tort claims” at issue and “directly relate[] to Chase hiring
[NTC] for the purpose of sending out [those] particular releases
and various documents.”

(Bly Dep. at 21).

More specifically,

NTC’s processes for preparing and filing such documents, including
its quality control, appear significant to the question of whether
the

defendants

Moreover,

it

here
is

caused

evident

the

from

plaintiffs’
NTC’s

alleged

submissions

injury.

that

such

information is unlikely to be available from any source other than
NTC employees themselves.
16).

(Finley Aff., ¶¶ 7-8; Lance Memo. at

I therefore find that the plaintiffs have shown a reasonable

necessity for the information.
Finally, NTC’s worries about disclosure are overblown. First,
the plaintiffs here are not its competitors. See, e.g., Woolbright
v. GEICO General Insurance, Co., No. 12 CV 21291, 2012 WL 12864931,
at *8 (S.D. Fla. Nov. 16, 2012) (“[T]rade secret information can
still be disclosed if the recipient if not a competitor with the
party who guards the information.” (citing EchoStar, 2010 WL
2822109, at *6-7)); see also Fla. Stat. § 90.506, law revision
council note (“The issue of trade-secret privilege usually arises
12

when a litigant seeks to compel disclosure of secret information
which is commercially valuable to his opponent.”).
and

Ms.

Lance

know,

the

protective

order

in

Second, as NTC
place

in

this

litigation will allow them to protect any truly confidential
information from disclosure to entities other than the attorneys
litigating this case.
(“[I]ssuance
protecting

of

any

a

See Cruise Compete, 2013 WL 12131320, at *3

protective

privacy

order

interest

is

that

an
may

adequate
exist

.

means
.

.

of

.”);

Woolbright, 2012 WL 12864931, at *8 (“Of course, a court has ample
authority to enter protective orders to protect any misuse of this
information as necessary.”);

EchoStar, 2010 WL 2822109, *6-7

(ordering disclosure of non-party’s trade secrets where court
limited

use

of

documents

to

specific

litigation

underlying

subpoena); see also Fla. Stat. § 90.506, law revision council note
(“This section permits the judge to order disclosure in any manner
designed to protect the secret.”).

The plaintiffs’ need for the

information outweighs the harm of disclosure.
reappear for deposition.

Ms. Lance shall

The plaintiffs are cautioned, however,

that their questioning should not progress too far afield from what
they represent they seek in their motion papers: information about
the types of clients NTC has and information related to certain
forms that Ms. Lance herself signed, and which were included as an
exhibit at her deposition.
13

2.

Sanctions

The plaintiffs seeks sanctions, apparently under Rule 37(a)(5)
of

the

Federal

Rules

of

Civil

Procedure,

“obstruct[ion]” of her original deposition.
Reply at 7-8).

for

Ms.

Lance’s

(Pl. Memo. at 18;

Under Rule 37(a)(5) of the Federal Rules of Civil

Procedure, if a party’s motion to compel is granted, the court
“must . . . require the party . . . whose conduct necessitated the
motion, the party or attorney advising that conduct, or both to pay
the movant’s reasonable expenses incurred in making the motion.”
However, this sanction may not be ordered if the moving party
“filed the motion before attempting in good faith to

obtain

the

. . . discovery without court action” or if “other circumstances
make an award of expenses unjust.” Fed. R. Civ. P. 37(a)(5)(A)(i),
(iii).
I will not impose sanctions here.
attempting

to

protect

trade

Ms. Lance was justified in

secrets

or

other

confidential

information belonging to NTC. Moreover, although I cannot say that
plaintiffs’ counsel failed to attempt in good faith to obtain the
discovery without court intervention, their conduct left something
to be desired.

Although Brent Tantillo (who took the lead in

questioning Ms. Lance) asserted at Ms. Lance’s first invocation of
privilege that he would call the Court to resolve the dispute
(Lance Dep. at 11) -- a practice I encourage -- he inexplicably
14

chose not to.
decided

to

Instead, at the second invocation, he abruptly

“walk,”

at

which

point

threatened to “go for sanctions.”

Mr.

Tantillo’s

(Lance Dep. at 21).

colleague
There does

not appear to have been any immediate attempt to resolve the
dispute

informally.6

In

these

circumstances,

imposition

of

sanctions on Ms. Lance would be unjust.
Conclusion
For the foregoing reasons, the plaintiffs’ Motion to Compel
Compliance with Subpoena of Third-Party Witness Erika Lance and for
Sanctions (Docket no. 1 in 17 MC 166) is granted in part and denied
in part as discussed above.7

6

The plaintiffs appear to argue that, because Ms. Lance did
not object or move to quash the subpoena directed to her, she
waived the objections she has now raised. (Pl. Memo. at 14-15).
I am aware of no precedent (and the plaintiffs have cited none)
holding that a deponent appearing on her own behalf pursuant to a
subpoena under Rule 45 of the Federal Rules of Civil Procedure
waives any assertion of privilege to individual questions if she
fails to move to quash that subpoena prior to the deposition.
Indeed, such a rule seems to me exceedingly inefficient.
7

In addition, the plaintiff shall file under seal in this
Court hard copies of all documents filed under seal in the Middle
District of Florida. This includes copies of the transcript of the
depositions of Erika Lance and Bryan Bly dated March 21, 2017. The
plaintiffs’ motion to seal those transcripts (Docket no. 2 in 17 MC
166) is therefore granted.
15